Adani godda power plant: BPDB to pay Tk 1,219.1cr for power not used

Finds study by Bangladesh Working Group on the External Debt and Growthwatch

If it does not add value, it is a waste, said the seminal American industrialist Henry Ford. And the quote best describes the situation the Bangladesh Power Development Board finds itself in with its deal with India's Adani Power.

Engineered during Indian Prime Minister Narendra Modi's maiden visit to Bangladesh in 2015, Adani Power has set up a 1,600MW thermal power in Jharkhand's Godda to supply most of the power generated to BPDB through a dedicated transmission line.

That power plant will be going into generation from August but its transmission would not be ready until December at least, meaning the power would be going to waste.

And yet, BPDB would have to pay $141.1 million, or Tk 1,219.1 crore, in capacity charge for the four months to December, according to the report "Adani Godda Coal Power Plant: An Achilles Heel of the Power Sector of Bangladesh".

Capacity charge is a penalty paid to the plant owner for failure to buy a certain portion of power readily available.

As per the agreement signed in 2017, Adani Power would supply 1,496 MW of electricity for 25 years from December 2021.

Because of the pandemic, the Adani Group subsidiary pushed the start date by six months. The power plant is all set to start commercial operation in August.

But the Power Grid Company of Bangladesh (PGCB) said more time is needed to get the infrastructure ready to import electricity. It will take at least December this year.

As per the agreement, Adani Power would install a dedicated 106 kilometres long 400 kV transmission line from Godda to the interconnection point.

To relay the power from the point, PGCB took up a Tk 225.2 crore project to construct a 28 km transmission line from the Indo-Bangla border to the Rohanpur substation in Bangladesh.

The substation is yet to be built as the materials have not arrived, Md. Mizanur Rahman Sarkar, project director of the transmission line, told The Daily Star.

"We will be able to import power from about 800 MW in the early months of the next year," he said.

BPDB has agreed to pay the Adani Godda power plant Tk 3.26 as the capacity charge per unit. For similar plants in Bangladesh, the capacity charge is Tk 2.83.

Nasrul Hamid, the state minister for power, energy and mineral resources, is not sure yet whether BPDB would have to pay the capacity charge for the four months that power is not imported from Adani Power, which is founded by Gautam Adani, the world's fifth richest person.

"But had we built it by ourselves and did not use the power, we would still have to make the capacity payment."

The government policy of 'no electricity, no payment' is not applicable for such large-scale independent power producers, he told The Daily Star.

"If we apply it, no one will agree to build a plant. Adani will invest and we have to pay a minimum return to them. If we don't take electricity, they will be in trouble," Hamid added.

To offtake electricity from the Godda coal power plant, BPDB would be doing away with its usual 'merit order dispatch' method and go with the 'priority-based dispatch'.

Under the 'merit order dispatch' method, the power plants supplying cheaper electricity are given the first opportunity to generate.

But under the 'priority-based dispatch' method, the imported power will be transmitted first keeping the domestic power plants idle even if those generate electricity at a cheaper rate.

So the power from Adani Godda will be 56.2 percent more expensive than other imported power, 36.9 percent more than imported coal power and 4.3 percent more than domestic coal power, according to the study by the Bangladesh Working Group on the External Debt and India-based Growthwatch.

Bangladesh will have to pay more than Tk 1 lakh crore to the Adani coal power plant as a capacity charge over the 25-year lifetime of the agreement, which is equal to enough to build three Padma bridges, said the study published on Monday.

In the worst-case scenario, BPDB will have to pay $423.3 million (Tk 3,657.2 crore), in capacity charges annually, and $11.01 billion (Tk 108,360.6 crore) over the plant's 25 years operational lifetime.

The Padma bridge was built for $3.87 billion, the Dhaka metro rail for $2.59 billion and the Karnaphuli river tunnel for $1.22 billion, the report added.

In the best-case scenario, the annual capacity charges payable to the Adani Godda power plant would be $331.66 million (Tk 2,865.55 crore), while the lifetime capacity charges would reach $8.62 billion (Tk 84,903.7 crore).

Adani Power will have its investment returned in a maximum of six years and a minimum of 4.67 years, according to the report.

"Capacity charge will depend on the availability of the power plant. If the power plant runs with 85 percent plant load factor (PLF), it will be the highest scenario and the power plant may drop its PLF at 53 percent, which is the lowest average in India," said Hasan Mehedi, one of the authors of the report.


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